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Lessons From Warren Buffett Value Investing Warren Buffett

Lessons From Warren Buffett: “Mr. Market” is There to Serve, Not Advise

Warren Buffett is fond of reminding investors about “Mr. Market,” Benjamin Graham’s personification of stock market fluctuations that he describes in Chapter 8 of The Intelligent Investor. Graham notes that sometimes the prices for stocks that Mr. Market quotes are reasonable, but sometimes “Mr. Market lets his enthusiasm or his fears run away with him, and the value he proposes seems to you a little short of silly.”

This brings us to a key point that Warren Buffett is keen to emphasize. The market is there to serve you not instruct you.

“The beauty of stocks is they do sell at silly prices from time to time,” Warren Buffett said at the 2012 Berkshire Hathaway Annual Meeting. “Ben Graham writes about it in Chapter 8 of The Intelligent Investor. . . Chapter 8 says that in the market you’re going to have a partner named ‘Mr. Market,’ and the beauty of him as your partner is that he’s kind of a psychotic drunk, and he will do very weird things over time and your job is to remember that he’s there to serve you and not to advise you. And if you can keep that mental state, then all those thousands of prices that Mr. Market is offering you every day on every major business in the world, practically, that he is making lots of mistakes, and he makes them for all kinds of weird reasons. And all you have to do is occasionally oblige him when he offers to either buy or sell from you at the same price on any given day, any given security.”

As Graham wrote:

“If you are a prudent investor or a sensible businessman, will you let Mr. Market’s daily communication determine your view of the value of a $1,000 interest in the enterprise? Only in case you agree with him, or in case you want to trade with him. You may be happy to sell out to him when he quotes you a ridiculously high price, and equally happy to buy from him when his price is low. But the rest of the time you will be wiser to form your own ideas of the value of your holdings, based on full reports from the company about its operations and financial position. “

Buffett’s full explanation on the stock market and stock prices

See the complete Lessons From Warren Buffett series

© 2022 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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BNSF

BNSF’s 2022 CapEx to Reach $3.55 Billion

(BRK.A), (BRK.B)

BNSF Railway Company’s 2022 capital investment plan will be $3.55 billion. The amount is up markedly from the 2021 capital investment plan of $2.99 billion.

This year’s capital plan focuses on projects that support the company’s growth and efficiency objectives while maintaining a strong and reliable railroad.

“Every year through our capital plan, we work to ensure we are able to continue to operate a safe and efficient rail network, provide our customers with the level of service they have come to expect from BNSF as well as position ourselves for future growth opportunities,” said Katie Farmer, president and CEO.

The largest component of this year’s capital plan will be to replace and maintain BNSF’s core network and related assets. Maintaining the railroad results in less unscheduled service outages that can slow down the rail network and reduce capacity.

The maintenance component of this year’s plan is $2.71 billion. The projects included in this part of the plan mostly entail replacing and upgrading rail as well as track infrastructure like ballast and rail ties (which are the main components for the tracks on which BNSF trains operate) and maintaining its rolling stock. It will include nearly 14,000 miles of track surfacing and/or undercutting work and the replacement of 381 miles of rail and approximately 2.7 million rail ties.

$580 million of this year’s capital plan will be for expansion and efficiency projects to support the growth of our Consumer, Agricultural and Industrial Products customers’ businesses. On its Southern Transcon route between Southern California and the Midwest, BNSF will continue a multi-year effort to add several segments of new double-track in eastern Kansas and begin a multi-year effort to add a new segment of triple-track in California, both supporting traffic growth. In addition, BNSF will continue a multi-year bridge project near Sandpoint, Idaho, to increase train capacity in the Pacific Northwest. Finally, BNSF will continue or begin multi-year intermodal facility expansion projects in North Texas (Alliance) and Chicago (Cicero). In Southern California (San Bernardino), BNSF is undertaking various initiatives to improve the efficiency of its intermodal facility. $259 million of this year’s capital plan is for freight cars and other equipment acquisitions.

© 2022 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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BNSF

BNSF Details 2021 Economic Development Results

(BRK.A), (BRK.B)

BNSF Railway Company has reported investments from customers served by the freight rail provider in 2021 totaled approximately $1.5 billion.

Large investments from customers including The Gatorade Company Inc., Mark Anthony Brewing and Northern Metal Recycling contributed to the sum. As a result of customer investments, BNSF projects the creation of more than 1,700 new jobs in local communities.

This marks the 11th consecutive year that BNSF customers and local economic development organizations have invested more than $1 billion in a calendar year for new or expanded facilities.

“The success of BNSF’s rail development program is a result of our employees working with our customers to build unique supply chain solutions that fit their distinctive needs,” said Chris Danos, assistant vice president, economic development. “Flexibility is the key to helping our customers maximize their investments, saving them development costs and expediting their speed to market.”

In 2021, new developments supported a wide variety of commodities including consumer, agricultural and industrial products in communities across the BNSF network. Highlights of supply chain solutions BNSF helped its customers achieve in 2021 include:

• The Gatorade Company, Inc. – With a significant investment, The Gatorade Company, Inc., co-located at BNSF’s Logistics Park Kansas City for warehouse and distribution center capabilities, generating 200 employment opportunities for surrounding communities.
• Mark Anthony Brewing – In Glendale, Arizona, Mark Anthony Brewing invested $450 million to build a new facility capable of receiving tank car shipments of glucose and alcohol to produce White Claw Hard Seltzer, creating 300 jobs.
• Northern Metal Recycling – Investing $75 million, Northern Metal Recycling constructed a new facility at the Becker Industrial Park in Becker, Minnesota, to handle both manifest and unit train shipments of scrap metals, offering 90 new roles for community members.

© 2022 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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NetJets

Lilium and NetJets Sign MOU for Purchase of Electric Vertical Take-Off and Landing Jets

(BRK.A), (BRK.B)

German aerospace company Lilium and Berkshire Hathaway’s NetJets have signed a Memorandum of Understanding for the prospective sale of up to 150 Lilium jets plus related after-market services.

Lilium is looking to produce the first electric vertical take-off and landing jet.

The proprietary technology at the core of the Lilium Jet is Ducted Electric Vectored Thrust (DEVT), which has zero operating emissions.

According to the company, the Lilium Jet can adapt for a range of customers and uses, with each configuration optimized for an unparalleled experience. The most spacious cabin arrangement is designed for private flights, with luxurious club seating. Alternatively, the cabin can be configured with 6 seats for passenger flights, or without seats to serve the zero-emissions logistics market.

Lilium announced the signing of the MOU in its 2021 FY Letter to Shareholders.

© 2022 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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Minority Stock Positions Stock Portfolio

BYD and Einride Ink Largest-Ever Order for Heavy-Duty Battery Electric Trucks Outside of Asia

BRK.A), (BRK.B)

BYD has sold Swedish freight technology company Einride some 200 Class 8 8TT battery-electric day cab trucks for deployment across the United States. The sale is the largest-ever order of its kind outside of Asia.

BYD will begin delivery of the first vehicles, all assembled in Lancaster, California, in February, with all 200 vehicles set to be delivered in waves over the course of the coming twelve months. Einride will utilize the vehicles to grow their global fleet of connected electric vehicles to serve their U.S. customers throughout key transport regions. Saga, Einride’s technology platform that plays the critical role in ensuring electric shipping is efficient and optimized, will power the full fleet of signed BYD vehicles.

“This historic order will give customers an up-close look at Einride’s industry-transforming intelligent operating system and our safe and reliable zero-emission battery electric trucks.” said Patrick Duan, Senior Vice President, BYD North America. “BYD Class 8 electric trucks showcase a strong combination of cutting-edge high tech and durability providing customers with the performance they desire while setting a new gold standard for driver comfort and safety.”

“As we continue to expand our U.S. operations and provide our end-to-end shipping solution at scale, having an OEM partner that is able to collaborate with us in delivering best-in-class electric vehicles is imperative,” said Niklas Reinedahl, General Manager North America at Einride. “This fleet of vehicles, which will be delivered at an industry leading pace and volume, will allow us to efficiently provide electric, cost-competitive and emissions-free transportation to our customers.”

The majority of the vehicles will be BYD’s 3rd Generation extend range 8TTs, which feature a cab styled by Wolfgang Josef Egger, the renown former Audi chief designer. The stylish air-ride cabs offer improved aerodynamics and energy efficiency alongside a spacious and ergonomic interior. The trucks come standard with Advanced Driver-Assistance Systems (ADAS), which includes Automatic Emergency Braking, Adaptive Cruise Control, Lane Departure Warning System and Blind Spot Detection, making driving easier and safer.

The new 8TT Integrates all of the lessons learned from our first- and second-generation vehicles to improve the comfort, effectiveness and robustness of our design.

The trucks are equipped with 563 kWh ultra-safe and reliable iron phosphate battery packs, an Electronic Parking Brake system, keyless entry and push-to-start functions, and will have up to 185kW CCS1 charging capability. The extended range 8TT offers a working range of 200 miles per charge.

The 8TT is a versatile vehicle, capable of performing drayage, regional haul, and distribution work.

BYD battery-electric trucks’ operation is clean, dependable and quiet, and have significantly fewer moving parts than trucks that rely on internal combustion engines.

BYD, the world’s largest manufacturer of electric vehicles, is the leader in battery-electric truck deployments with more than 10,000 trucks in service around the world and over 200 that are hard at work in the United States. BYD battery-electric trucks are deployed across America, from the ports of Los Angeles, Long Beach and Oakland in California to refuse collection services, distribution efforts and port terminal operators on the East Coast.

BYD and Berkshire Hathaway

In 2008, Berkshire Hathaway bet on BYD’s potential, purchasing 225 million shares for $232 million. It’s an investment that has paid off handsomely. Berkshire’s original investment of $232 million had grown in value to $7.69 billion as of December 31, 2021.

© 2022 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway and BYD, and this article is not a recommendation on whether to buy or sell a stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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Financials

Berkshire Operating Earnings Top $7B in 4th Quarter, $27.4B for 2021

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Berkshire Hathaway HomeServices

Berkshire Hathaway HomeServices Expands in Colorado

(BRK.A), (BRK.B)

Berkshire Hathaway HomeServices, a global residential real estate brokerage franchise network, has announced its further expansion in the West region with the addition of Berkshire Hathaway HomeServices Signature Properties. The renowned brokerage brings an additional office and 12 real estate professionals to the global network. The addition marks the brand’s continued growth in the Centennial State and its ninth network company in Colorado.

The brokerage is owned and led by real estate veteran, Brenda Wild. On why she chose to join the network, Wild said, “The mission of our company stems from our desire to provide our clients with relationship-based service from start to finish. The Aspen real estate market is currently setting records and is a globally known second home destination. Berkshire Hathaway HomeServices is synonymous with world-class marketing for a global reach, and our alliance enables us to service our clients with exceptional service, marketing and global outreach on our listings.

“With the market setting records we are excited to welcome Brenda and her team to the network,” said Christy Budnick, CEO, Berkshire Hathaway HomeServices. “The region’s wide variety of luxury properties and high-class accommodations continues to develop. Brenda and her team have experience representing some of the finest properties.”

By joining the network, Berkshire Hathaway HomeServices Signature Properties agents gain access to Berkshire Hathaway HomeServices’ active referral and relocation networks, and its “FOREVER Cloud” technology suite, a powerful source for lead generation, marketing support, social media, video production/distribution and more.

The brand also provides an exclusive Luxury Collection marketing program for premier listings. Its Prestige Magazine showcases network members’ premium listings with a strong lineup of feature stories covering topics that appeal to high-end real estate clients.

“Aspen, Colorado continues to be a popular destination for those looking to match a home with their lifestyle,” said Gino Blefari, Chairman, Berkshire Hathaway HomeServices. “Brenda has led a successful company for 10 years and has been in the industry over 20 years and is a true expert in her community. Her team strives to provide their clients with a seamless experience from start to finish and we look forward to welcoming them to the network.”

In the past 12 months, there have been 205 single-family homes sold in the Aspen market. This is a record-setting number of home sales for Aspen in any 12-month period — and twice the sales volume the market experienced during the pre-pandemic years of 2018 and 2019. The last record year for Aspen home sales was back in 2006 when 146 Aspen homes traded hands in a single year.

Berkshire Hathaway HomeServices Signature Properties has one office in the area with plans for additional locations in Basalt and Carbondale.

© 2022 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell a stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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Brooks

Brooks Posts Record Growth, Surpasses $1 Billion in Revenue

(BRK.A), (BRK.B)

Berkshire Hathaway’s running shoe and fitness apparel company, Brooks Running, set new records in 2021, ending the year with global revenue exceeding $1.11 billion, an increase of 31% percent year over year.

This marks the first time the running brand has reached $1 billion in annual revenue.

Brooks navigated the ongoing COVID-19 global pandemic and related supply chain disruption by reaffirming its commitment to the running community, remaining agile and transparent in servicing strong customer demand, and attracting new runners worldwide to the brand. All the while, the company continued to invest heavily in scientific research, technology, and industry-leading runner insights to deliver best-in-class performance gear.

“Brooks had a record year across every metric we track,” said Jim Weber, Brooks CEO. “Crossing the $1 billion threshold is especially gratifying as it reflects the outcome of a 20-year focus and commitment from our global team to inspire and serve runners better than any brand in run. We enter 2022 with strong demand for Brooks products in all retail channels as the only major brand exclusively anchored in performance across the run lifestyle, from sport enthusiasts to fitness seekers. I am optimistic the best is yet to come for the run community and for Brooks.”

The worldwide demand for performance running footwear continued to grow during the past year. In 2021, Brooks sold 25% more pairs of shoes globally compared to prior year.

The U.S. total running shoe market increased dollar sales by 20% in 2021, according to The NPD Group, as Americans adapted to COVID-19 realities and sought to reclaim their active lifestyles. Brooks’s commitment to reach runners where they shop is reflected in strong market share across channels in 2021. Brooks was again the leading brand in the running specialty channel, which Brooks views as an influential, community centric channel.

In the athletic specialty and sporting goods (ASSG) channel, Brooks also earned No. 1 market share in adult running shoes, with 28% dollar share in 2021 — a year-over-year increase of 4 percentage points. Across all U.S. retail channels combined, Brooks was the No. 2 ranked adult performance running footwear brand in 2021, with 19% dollar share, gaining 2 percentage points year over year, reflecting strong sales growth up 37%. Brooks produced the industry’s top two franchise styles for adult performance running footwear: the Ghost at No. 1 and the Adrenaline GTS at No. 2.

Brooks’ direct e-commerce revenue in North America grew 149% over pre-pandemic levels in 2019.

In local currency, Brooks’ EMEA (Europe, Middle East, and Africa) business grew 25% in revenue year over year. Momentum occurred across all countries and distribution channels including specialty retail, general sporting goods, and directly on BrooksRunning.eu. This pace further underscores the brand’s demand throughout the region.

© 2022 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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Minority Stock Positions Stock Portfolio

BYD Signs MOU to Build New Energy Vehicles in Uzbekistan

(BRK.A), (BRK.B)

BYD Auto Industry Co Ltd (BYD) and UZAVTOSANOAT JSC (UzAuto) signed a strategic Memorandum of Understanding (MOU) to develop, produce and popularize New Energy Vehicles (NEV) in Uzbekistan.

The MOU was signed on Feb. 16 during an online ceremony led by Michael Shu, General Manager and Managing Director, BYD Europe, and Urmzakov Shavkat, Chairman of the Board of UzAuto in Uzbekistan.

BYD, the world’s leading NEV manufacturer, has more than 26 years’ experience in battery research and development, and is renowned globally for its pioneering innovations in this field. BYD is the only NEV producer to have developed its own powertrain systems, power batteries, automotive semiconductors drive-motors and motor controller systems. It is also one of the first manufacturers in the world to produce one million electric passenger cars.

UzAuto is the largest and only manufacturer in Central Asia to offer a full range of vehicles. UzAuto has a longstanding heritage spanning several decades. During this time, it has established an excellent reputation within the industry, achieving a significant market share in Uzbekistan and the neighbouring region. UzAuto has a strong sales and after-sales network, and has gained recognition for outstanding service.

Umurzakov Shavkat, Chairman of the Board, UzAuto, said: “Today is an important day for the Uzbekistan automotive industry as it demonstrates our country is moving to a new stage of development. This Memorandum of Understanding with BYD means that UzAuto is ready to take all necessary measures to start the implementation of new energy vehicles. We are looking forward to a successful and mutually beneficial cooperation.”

Together BYD and UzAuto look forward to developing and producing sustainable and practical new energy vehicle solutions that are kind to the planet, while excelling in safety, performance and efficiency. This MoU is core to a new era of sustainable transport, laying the foundations for the mass rollout of new energy vehicles, supported via efficient sales channels and after-sales services.

BYD and Berkshire Hathaway

In 2008, Berkshire Hathaway bet on BYD’s potential, purchasing 225 million shares for $232 million. It’s an investment that has paid off handsomely. Berkshire’s original investment of $232 million had grown in value to $5.897 billion as of December 31, 2020.

© 2022 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway and BYD, and this article is not a recommendation on whether to buy or sell a stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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Appointments Kraft Heinz

Kraft Heinz Names CEO Miguel Patricio as Chair of the Board

(BRK.A), (BRK.B)

The Kraft Heinz Company has announced that the Board of Directors intends to appoint Chief Executive Officer Miguel Patricio as Chair, subject to his re-election at the Kraft Heinz 2022 Annual Meeting of Stockholders.

Current Chair of the Board of Directors Alexandre Behring will retire following the end of his term at the 2022 Annual Meeting.

“We are very pleased with the progress experienced by the Company in advancing its strategic plan during the past few years under Miguel’s leadership and see his elevation to Chair as a natural progression, providing a continuation of strong and consistent stewardship to guide the Company well into the future,” said Alex Behring, Kraft Heinz Board Chair. “I have enjoyed my time working alongside Miguel, the Board, and the Kraft Heinz leadership team.”

“Alex’s contribution to Kraft Heinz has been invaluable and his impact will continue to be felt for many years,” said Miguel Patricio, Chief Executive Officer and Director. “I am truly honored at the opportunity to succeed him as Chair.”

“On behalf of Berkshire Hathaway, I would like to thank Alex for his dedication, leadership, and service to Kraft Heinz. Alex and I have worked closely together since 2013, when we both served on the H.J. Heinz Board, and I know our relationship will extend well into the future,” said Greg Abel, member of the Kraft Heinz Board of Directors and Vice Chair, Non-Insurance Operations of Berkshire Hathaway. “We look forward to working with Miguel as Chair as his vision for the Company’s transformation continues to move the business forward.”

The Company also announced that the Board of Directors has nominated James Park of Fitbit at Google to stand for election at the Kraft Heinz 2022 Annual Meeting.

“I am also thrilled by the prospect of adding James Park to our Board,” Patricio said. “Technology and digital capabilities are extremely important elements of our continuing business strategy. His background and experience will be especially valuable to Kraft Heinz and the Board as we begin the next phase of our transformation.”

James Park, 45, is a technology entrepreneur who co-founded Fitbit, Inc., a connected health and fitness company, that was acquired by Google in January 2021. Mr. Park is Vice President and General Manager, Fitbit at Google. He previously served as Chief Executive Officer, President, and member of the board of directors of Fitbit since 2007, and as chairman of the board of directors from 2015, until its acquisition. He is a leader in the technology industry with a strong track record of ideating and operating successful technology companies. Park was also the co-founder of Wind-Up Labs, Inc., an online photo sharing company acquired by CNET Networks, Inc. in 2005, and Epesi Technologies, Inc. In 2015, he was named to Fortune magazine’s 40 Under 40, an annual ranking of the most influential young people in business.

© 2022 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no gu